Property Division in a Divorce

17 May 2019
by
National Bank

Once the decision is made to divorce, a couple must consider how
they will divide their assets. Whether you are married or in a civil
union, this is an essential step. Here’s what you should know to
avoid any surprises when it comes time to divide your assets.

What does family patrimony include?

Family patrimony is defined as the group of assets shared between
partners who decide to end their marriage or common-law union. You
should be aware that some assets are automatically included in the
family patrimony, no matter who they belong to. These include:

Residences used by the family (house, cottage, condo in Florida,
camping trailer, etc.)

Most pension plans are part of the patrimony. Such is the case for
profit-sharing plans, supplementary annuity agreements for high-income
earners and unregistered annuity contracts (purchased with funds that
did not come from a pension plan).

What assets are excluded from the family patrimony?

Anything that is not designated as part of the family patrimony is
excluded: income properties, businesses, money in the bank, stocks,
bonds, jewellery and other personal property, etc. The same applies
for money and property
received as a gift or inheritance.

However, keep in mind that some assets not included in the family
patrimony may have to be shared under the terms of your matrimonial
regime. A marriage contract can outline details for the consideration
of possible additional property.

Is Ontario law different from Quebec?

In Ontario, when a marriage is dissolved, each person’s contribution
to the marriage is taken into account. Any property, or its equivalent
value, acquired throughout the marriage that still exists at the end
of the marriage must be divided equally. And, if any property owned by
either spouse at the beginning of the marriage has seen an increase in
value during the duration of the marriage, that gain must also be
shared. For this sharing to happen, a settlement may be due to one of
the spouses, and that settlement is called an equalization
payment, or an equalization of net family property.

Exceptions exist, of course. Gifts or inheritances received
throughout the marriage from a person other than a spouse and not used
towards the marital home may be considered excluded property
and may not be included in such a settlement.

Determine the value of what will be shared

When a couple divorces,
each partner has the right to half of the cash value of the family
patrimony acquired during their life together. To determine this
amount, the first thing you need to do is figure out the market value
of your assets.

The second step is to calculate the net value of the patrimony, less
any debts (mortgage, car loan, etc.).

Next, if applicable, the value of the assets at the time of the
marriage must be deducted, as well as money received as a gift or
inheritance that was used to pay for family property. For example, if
your house belonged to you before the marriage, you could recover your
investment when dividing assets.

You must also consider the added value of the property, i.e., the
increase of its value during the marriage. Spouses share the added
value by respecting the proportions of the amounts they already paid
at the time of marriage. For example, if you have already paid back
15% of your mortgage during the marriage, you could recover this
amount plus 15% of the added value acquired during the union.

Context: Charles and Delphine are divorcing

During their marriage, they purchased a home for $200,000. They
financed their $50,000 downpayment with money Delphine received as
inheritance. Today, the house is valued at $280,000 and the couple has
a remaining mortgage of $100,000.

The net value of Charles’s and Delphine’s patrimony would be
calculated as follows:

House

$280,000 - $100,000 (mortgage) = $180,000

From this amount, subtract the $50,000 from Delphine’s inheritance
and the home’s added value in proportion to this amount: $50,000 +
($80,000 x 25% of the downpayment) = $70,000.

Therefore, $180,000 - $70,000 = $110,000 to be shared.

Charles is entitled to $55,000 and Delphine to $125,000 ($55,000 + $70,000).

Furniture

$15,000 value, i.e., $7,500 each.

Car

$12,000 - $4,000 (car loan balance) = $8,000, i.e., $4,000 each.

Charles’s pension fund

Charles has $70,000 in his pension fund. From this amount, deduct
$30,000 in rights and interests that Charles accumulated before his
marriage and are not shareable:

In the end, Charles’s half of the assets will total $116,500 and
Delphine’s will total $156,500.

Is it possible to avoid dividing the family patrimony?

The deadline to opt out of family patrimony laws was December 31,
1990. A spouse who realizes today that it was not in their interest
can no longer review their decision. However, if this is your case and
you have waived your share under threat or breach of trust, the waiver
could be annulled by a judge. Speak with a lawyer for more information.

However, it is still possible to waive your rights to share at the
moment of separation or the death of your spouse, but your partner is
not obligated to do the same. The waiver is done before a notary and
must be registered with the Registre des droits personnels et reels mobiliers.

You should also know that, upon your partner’s death, you are
obligated to share the family patrimony before managing the rest of
the estate. Family patrimony laws always take precedence over the terms of a will.

What if you find love again?

If you say, “I do,” a second or third time, you are still required to
respect family patrimony laws. However, remember that if things fall
apart, only the assets acquired during the marriage or common-law
union must be shared, unless other terms are outlined in your
matrimonial regime.

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